A health care claim is a detailed invoice, or statement, that your doctor, clinic, diagnostic facility, or hospital will send to the carrier that handles your health insurance. It includes an exact breakdown of services rendered, referenced by standard codes used in the industry. The claim is submitted to the health insurance company in good faith that services rendered are covered by your insurance.
How Health Insurance Claims Are Processed
Processing health claims typically takes place behind the scenes between medical providers and patients' health insurance carriers. In most cases, medical providers have dedicated staff members that prepare medical billing and update medical records following treatment.
Preparing the Claim
Preparing the claim involves assigning insurance codes to each service rendered. The most common coding methods include:
- ICD-10-CM: This is the International Classification of Diseases, Tenth Revision, Clinical Modification (ICD-10-CM). It is a system used to classify and code all diagnoses, symptoms, and procedures in conjunction with hospital care in the United States.
- CPT: CPT stands for Current Procedural Terminology, which is the code set used to identify medical, surgical, and diagnostic procedures and services.
- HCPCS: HCPCS is the Healthcare Common Procedure Coding System. These codes are used to identify products, supplies, and services that are not included in the CPT codes. These may include ambulance services and durable medical equipment, prosthetics, orthotics, and supplies, when used outside of a doctor's office.
Submitting the Claim
Once a bill is prepared, the provider will submit the bill to the insurance company for payment. Some providers may send the claim first to what's called a clearinghouse. These are intermediaries that check the claim for any errors, also verifying it's compatible with the payer software.
Processing the Claim
Once received, the insurance company has several options:
- Accept and pay in full
- Deny the claim due to a billing error, which is then returned to the provider for corrections
- Reject the claim in its entirety, perhaps due to services not being covered
If the bill is paid, you may receive a statement (or explanation) of benefits from your health insurance company and/or a statement from the provider, showing zero balance. If you owe a deductible or co-pay that you didn't pay at the time of the visit, you'll receive a bill in the mail as well. If you see anything that doesn't look correct, you will need to contact your medical provider and/or insurance carrier.
Special Case: Pre-Approvals
While billing takes place after services are rendered, there are some circumstances in which pre-approval is required. Have you ever been scheduled for a procedure and the doctor's office or diagnostic center indicates they need to get approval from your health insurance company before you come in? When this happens, the medical provider is seeking pre-approval. This is to ensure the treatment is covered under your policy and to confirm exactly what amount the health insurance company will pay for reimbursement.
Assuming the procedure is approved, your carrier will provide the medical provider with a pre-approval code. In some cases, a letter that shows your approved treatment procedures will be sent to the medical facility or physician. You will be informed of the approval and told how much you will have to pay beyond the portion that will be covered by your health insurance. You may have to pay your portion before services are rendered. If pre-approval is denied, you will be notified and have an opportunity to appeal to the insurance company.
In and Out of Network Claims
The amount the medical provider receives, as well as your out-of-pocket costs, will vary based on whether you seek treatment from an "in network" or "out of network" provider. Health insurance carriers don't all reimburse the same amounts, and there can be significant differences between policies. Carriers and providers form networks, and some doctors and other medical providers choose not to work with certain carriers because they refuse to reimburse at rates the provider is willing to accept.
In Network Providers
A doctor, hospital or other medical provider that accepts your health coverage is said to be "in network" and is known as a participating provider. Visiting a doctor within your network can mean you save money. For example, if a service costs $150 and your carrier only covers $80, a doctor who is in the network is willing to accept only $80 for the service. Instead of coming after you for the remaining difference, the doctor's office simply accepts the pre-negotiated payment amount.
Out of Network Providers
If you choose to use an "out of network" doctor or other medical provider, then you will be responsible for the difference between what the service costs and what your carrier covers. Each health policy specifies what covered individuals are responsible for paying themselves when seeking treatment or services from out of network providers. Using the same $150 example from above, you would be responsible for the $70 that is not reimbursed by your insurance company when visiting an out of network doctor of facility.
Responsible Party Denials
Just like other types of insurance coverage, your health care provider isn't going to pay the bill if someone else is technically responsible for it. These denial situations tend to arise after an automobile accident or in some instances of workers' compensation. Laws vary by state, so it's important to contact your specific insurance company for their policy and applicable state law.
Insurers handle these situations differently. In some cases, your health insurance carrier may pay your bills outright and go after the at-fault party, called subrogation. In others, they may assert a lien for any settlement you reach, expecting reimbursement for bills paid.
The term HIPAA is an important one when it comes to health claims. HIPAA stands for the Health Insurance Portability and Accountability Act, which was passed in 1996. Part of it was enacted to protect the privacy and security of patient information, prevent fraud, and establish standards for electronic data exchange.
Under Title II, HIPAA sets forth some guidelines for medical billing, including the formal regulation of codes, which include ICD, CPT, and HCPCS. This helps create a standard uniform method among all parties involved in the healthcare process - payers, providers, and government agencies, which includes Medicare and Medicaid.
Title II also puts forth the mandatory use of National Provider Identifier numbers (NPI). These are ten characters long and can be alphanumeric, and each is unique and will never be reused.
When You Don't Have Health Insurance
While many people have some sort of health coverage, not everyone does. And, there may be instances where you find yourself in an emergency situation and you don't have the applicable coverage for the treatment you need. Doctors and hospitals aren't automatically going to give you the same rates they do health care insurance companies, so it's up to you to negotiate your own bills down.
Many people don't realize you can negotiate payment of services, but it is possible to do so in many cases. It's in your best interest to always be polite and go straight to the hospital billing department or pay a visit to the doctor's office directly. Do your research to familiarize yourself with the applicable codes, usual and customary charges, and techniques for negotiating medical fees.
What to Expect
To help facilitate an easier time with medical claims, get to know your health insurance policy ahead of time. Learn what doctors and facilities are included in your provider network and avoid going to ones that are out of network whenever possible. This will help to keep your out-of-pocket costs as low as possible.
It usually takes 30 days or more to get billing submitted to the health care insurance company and hear back, so don't expect a bill in the mail just days after a procedure. Sometimes, it can take even longer if the bill gets rejected for an error.
If you run into problems, try to solve them as calmly as possible. If the matter can't be resolved informally, you can file an appeal with your health care provider. You may also be able to lodge a claim/complaint with your state's insurance department if warranted.